By Staff writer
New JLL report says region needs more than 3.5 million additional affordable homes
Middle East real estate markets are suffering from a shortage of middle-income, or affordable, housing and major efforts are required to address the current imbalance, according to a new report.
JLL, the global real estate investment and advisory firm, said that this shortage is an important and consistent issue across all three major MENA markets of Saudi Arabia, the UAE and Egypt.
Its report said that while there is a general recognition of the problem and a growing number of policy initiatives and projects targeting the middle income sector, more needs to be done if the current shortage is not to widen further before it is reduced.
In the report, JLL defines middle-income housing as that provided by the market which is affordable to the middle tranche of households on the assumption that they spend no more than 30 percent of their gross household income on housing.
The report identifies two major components to the market - properties for sale and those for rental, as many middle income households cannot purchase property due to either regulatory restrictions or a lack of available capital and finance.
JLL indicates that an affordable sales price in the UAE is currently about AED790,000 with an affordable annual rent of around AED72,000.
In Saudi Arabia, this drops to about SR450,000 and SR47,000 respectively.
"The importance of the middle-income sector of the market should not be under estimated, as it accounts for over 60 percent of all household in both Saudi Arabia and Egypt. That equates to 3.3 million households in Saudi Arabia and 12 million in Egypt," JLL said.
"The relative numbers in the UAE are smaller, but there are still over 820,000 middle income households, representing almost 40 percent of all households in the UAE."
In 2011, JLL identified the need for an additional 3.5 million affordable homes across the region and the report said this gap has almost certainly increased over the past five years.
Only 22 percent of residential units launched in 2015 to date in Dubai are "affordable" according to JLL's definition.
JLL's report suggests that resolving the shortage of middle-income housing requires a concentrated effort involving government agencies, private developers and other stakeholders.
Providing developers with access to affordable land, reducing the cost of infrastructure and land servicing costs borne by affordable housing projects and adapting developers' business models to make affordable homes more attractive are all recommended.
Regulating the delivery of affordable homes and ensure ongoing affordability is also recommended.
Craig Plumb, head of research at JLL MENA, said: "Whilst none of these solutions are easy, we believe that working together, governments and developers can address the shortfall that JLL has identified in this report.
"Governments around the region have started to allocate significant financial resources to encourage more development of middle-income housing, but more needs to be done. We believe there is a need to re-think the existing relationship between Government and the real estate development industry to create more affordable housing that middle income families can afford.
"We also recommend more innovative planning and design initiatives to create more attractive, environmentally sustainable and cohesive communities as well as accessible financing, empowering middle income families to take a stake in their future."